Casino suppliers quit Macao for resurgent Singapore and Philippines
Suppliers of slot machines, baccarat table systems and other casino equipment are moving out of Macao to more welcoming markets, in another sign of the damage China’s “COVID zero” policy has wrought on the formerly bustling gambling hub.
With demand in Macao waning, Light & Wonder, a leading provider of products used in casinos, is relocating its expatriate staff to the Philippines, which has become its top market in Asia and where it is opening a new office. Another equipment-maker from Japan is also shifting employees to the Philippines and Singapore.
The Japanese company is moving as many as 30% of its employees and has taken more than half of its inventory out of Macao due to supply-chain challenges, a person familiar with the matter said, asking not to be identified discussing information that wasn’t public. The person also asked for the company not to be named. It has seen revenue plunge about 90% in Macao as casinos shelved purchasing plans amid a prolonged industry slump.
Macao’s casinos aren’t buying any new equipment until they get licenses to continue operating at the end of the year, and without fresh sales, Light & Wonder is only getting limited revenue from maintenance and technical support, said Ken Jolly, the U.S. company’s Asia vice president and managing director.
“The Philippine market has become a dominant market in Asia, and it makes sense for us to put more staff there,” Jolly said.
After well over a decade as the world’s pre-eminent casino center, Macao ceded that crown back to Las Vegas as COVID lockdowns and China’s travel bans choked off the usual flood of people coming in by air, sea and land. Prior to the pandemic, Macao’s gambling market — heavily reliant on mainland customers — was six times bigger than Vegas’s, with annual revenue of $36 billion.
Macao Gaming Equipment Manufacturers Association Chairman Jay Chun said he knew of at least four multinational casino suppliers relocating manpower and resources overseas. The trend could accelerate after the government announced a cap of 12,000 gaming machines across the city for 2023 under a new casino law. There were already 17,000 machines in the market in 2019.
Macao was under pressure even before the pandemic struck, with Chinese President Xi Jinping cracking down on high-rolling gamblers in the territory as part of a campaign against money-laundering, corruption and capital flight.
This June, a virus flareup prompted China to suspend quarantine-free travel with Macao for more than a month, a devastating blow to casino operators already bleeding millions of dollars. Tourist arrivals averaged a paltry 300 a day in July and gaming revenue dropped to a record low of $49 million in the month, when a lockdown also shuttered casinos for two weeks.
While social-distancing rules still apply at gambling tables, some restrictions have been peeled back. But people are staying away, fearful of getting trapped in a snap lockdown like those that have also enveloped Chinese cities such as Shanghai, Sanya and Chengdu.
For August, Macao’s gaming revenue was just $271 million, about 9% of pre-pandemic levels. Meanwhile, gaming revenue in Singapore returned to 70% of the level seen before COVID-19 in the second quarter, while the Philippines and South Korea are both back to about 75%.
“Singapore and the Philippines are growing exponentially,” Chun said. “Macao has already lost its shine.”
G2E Asia, one of the world’s biggest gaming conferences, was held outside of Macao last month for the first time since the annual event started in 2007. As Southeast Asian casino operators and global suppliers gathered in Singapore’s Marina Bay Sands resort, representatives from gaming companies in Macao, where residents still need to undergo seven days of hotel quarantine when returning from overseas, were absent.
Macao is also revamping standards for electronic gaming machines, requiring manufacturers to design new software, which could be particularly costly and challenging for smaller suppliers. Some may decide not to update less popular machines as a result, Chun said.
The shifting priorities of suppliers and fewer types of gaming machines could threaten Macao’s ambitions to develop a Vegas-style, entertainment-driven mass tourist market to counter China’s campaign against high rollers. Unlike premium gamblers who prefer table games, casual bettors tend to be attracted by slot machines, Chun said.
Slot machines accounted for about 5% of Macao’s gaming revenue in 2019, compared with more than 50% for the Las Vegas Strip.
To secure new licenses and as part of Beijing’s push to reduce Macao’s reliance on gambling, casino operators must commit to investing in nongaming areas such as Chinese medicine and technology. That will force them to cut spending on low-yielding gaming machines, said Daniel Cheng, a former executive at gaming companies including Hard Rock International.
“Macao can’t expect normal services to resume as before,” said Cheng. “The Macao of old is a thing of the past.”